How Much More TARP?
How much is left in TARP? Like a lot of things in Washington, it depends upon how you count. How much more taxpayer money will Congress put in TARP? None, at least for the next several months.
Sunday morning, March 29, Treasury Secretary Tim Geithner told ABC's George Stephanopoulos:
George, we have roughly $135 billion left of uncommitted resources. Less is out the door, but in terms of, if you look at what's not committed yet, it's roughly, you know, $135 billion.
Now, that -- that estimate includes a judgment, a very conservative judgment about how much money is likely to come back from banks, that are strong enough not to need this capital, now, to get through a recession.
But that's a reasonably conservative estimate. And it gives us -- and this is very important -- substantial resources to move ahead with this broad-based suite of initiatives to help get the financial system back in the business of providing credit.
This is an accurate statement according to a Government Accountability Office study released last Tuesday, however it misses the bigger picture. GAO found that adding up the maximum amount of every Treasury announced TARP program yields $667.4 b. committed out of the $700 b. Congress has approved so far. However, the bank Capital Purchase Program and the Term Asset-Backed Securities Loan Facility (TALF) depend upon market participation, which GAO projected would use $32 b. and $45 b. less than the maximum amount, so $109.6 b. of TARP would remain. Mr. Geithner knows of some banks that want to pay back their TARP, although so far federal regulators have prevented them from doing that, so his $135 b. is a reasonable estimate. However, the bigger picture is that there are approximately $3.6 trillion of troubled assets on bank balance sheets, a lot more than can be cleaned up with $700 b. of TARP. That figure was divulged by the Deputy Chair of the TARP Congressional Oversight Panel at a hearing of the Joint Economic Committee on March 11.
So will Congress put more taxpayer money into TARP when the need arises? For the next few months, the answer is clearly a resounding NO! Over the past month, in hearing after hearing, members of both parties in both houses of Congress have railed against the bad deal the taxpayers are getting under TARP. On February 6, the Congressional Oversight Panel testified that of the $254 b. of TARP committed until then, Treasury had received collateral that was worth $78 b. less. A large share of the losses were in AIG and Citicorp. This story is going to get worse before it gets better because the worst assets will stay hidden the longest as banks hold them in hope of recouping some lost value. The longer the banks hold the troubled assets, the longer businesses and consumers will have to wait before banks start lending again. There's the conundrum: the taxpayers will have to suffer some more to restart bank lending. That's worth doing to revive the economy, but a lot depends upon how bad a deal the taxpayers get. That's why Treasury is playing the game cautiously, in hope of getting a better deal for taxpayers AND enough lending from the banks to revive the economy.